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Business academic claims Labor’s threats to improve worker conditions were behind its exit from Australia.
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Deliveroo quit ‘due to gig economy crackdown’
25 November 2022
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A crackdown on work conditions in the gig economy is behind Deliveroo’s exit from the Australian market, according to one business academic.
Lecturer at the School of Management and Governance at UNSW Business School Greig Taylor said a recent Fair Work Commission court case over dismissal of a delivery rider — which the Deliveroo subsequently won on appeal — might have been the trigger to leave.
“This had a number of implications beyond this specific case,” he said. “It was in danger of setting a precedent that could have recategorised its entire rider workforce as employees, adding significant costs to its operations, as statutory minimums and contributions would apply.”
“It has pulled similar stunts in Europe this year, as regulators and policymakers begin to clamp down on the miscategorisation of workers in this sphere.”
The case revealed that Deliveroo classified its food delivery riders as independent contractors rather than employees, meaning they had few entitlements when let go.
The government has said it intended to close the loopholes which allowed workers to be exploited.
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“Labor will ensure that the Fair Work Act provides appropriate coverage and protection for all forms of work and that gig economy platforms and other working arrangements are not used to circumvent industrial standards or to undermine workers’ rights to collectively organise and access their union,” the party said at its 2021 conference.
Deliveroo claimed that a high level of competition in Australia’s food delivery sector meant that it failed to make enough profit to continue.
Michael Korda, partner at Deliveroo’s voluntary administrators KordaMentha, said the company was unable to gain sufficient market share to make the business sustainable.
“To do so would require significant ongoing investment in the Australian market,” he said. “Given this, Deliveroo Australia’s UK parent has advised that it has decided to cease funding Deliveroo Australia.
“Without ongoing funding, the director of Deliveroo Australia resolved to place the company into administration.”
“Administrators had no alternative but to cease operations immediately in the absence of financial support.”
Because Deliveroo’s riders were not classed as employees it was unlikely they would receive much, if anything, from the exit, according to Dr Taylor. KordaMentha had classified them as unsecured creditors.
The Transport Workers Union (TWU) called on the administrators to prioritise Deliveroo workers while urging the government to act on its previous commitment to fix the gig economy.
“This will be a shock to the thousands of food delivery riders who rely on Deliveroo for income,” TWU national secretary Michael Kaine said.
“The TWU has sought urgent consultation with administrators on what entitlements might be clawed back for food delivery riders who stand to lose their jobs in the blink of an eye.”
“Deliveroo’s sudden and cowardly act treating workers as callously in exit as it did in operation highlights the urgent need for the federal government to enact gig reform.
“Transport workers were hit first and hardest by the gig tsunami and are now being left high and dry by Deliveroo at the first indication that it can’t rely on exploitation to make profits.”
The Deliveroo decision follows the Foodora exit in 2018 after it was taken to court over misclassifying employees.
“The reality was that the company had been taken to the federal court by the Fair Work Ombudsman earlier that year over the highly controversial practice, widespread in the sector, of classifying its employees as independent contractors,” said Dr Taylor.
“When the ruling went against it, Foodora announced they were exiting the Australian market.”
The first creditors’ meeting for Deliveroo Australia will be held on Monday 28 November.
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